Abu Dhabi economy on the rise

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Aerial view of the city of Abu Dhabi.
Aerial view of the city of Abu Dhabi. The Business Cycle General Index for the first quarter for the Emirate of Abu Dhabi indicated that Abu Dhabi economy achieved high levels of growth in 2012, exceeding expectations. Photo-Visit Abu Dhabi

Latest figures show economic conditions in the Emirate of Abu Dhabi have improved considerably during Q1 of 2013.

The Abu Dhabi government continues to play a pivotal role to stimulate local demand and provide the best investment prospects for investors and business to tap various opportunities in commercial, industrial, services and construction activities.

The Business Cycle General Index for the Emirate of Abu Dhabi (Q1) was released by the Studies Directorate of Abu Dhabi Department of Economic Development indicating the Abu Dhabi economy exceeded expectations, and achieved high levels of growth in 2012.

The Emirate experienced an increase in the number of new commercial licenses issued for business and professional activities and rising rates of employment compared to 2011.

The result of the Business Cycle Index revealed that government spending had increased and that the implementation of several major projects ware complete. Most markets have reached advanced stages of debugging after the global financial crisis, which resulted in accelerating of the performance of the Emirate’s economy, increasing the number of commercial licenses and reviving the Abu Dhabi Securities Market index, due to the positive bank and real estate company indicators.

The index reflected the Abu Dhabi government announcement at the beginning of this year;

  • A total of AED 330 billion is to be pumped in various capital projects in various sectors, from 2013-2017, to boost partnership with the private sector
  • To stimulate economic activity, and contribute effectively to the development and improvement of services for businesspeople and investors
  • Improve the investment environment to place Abu Dhabi on the list of top investment friendly destinations

Abu Dhabi Real Estate – revival in demand for housing

A quick review of the most important economic developments during Q1, shows that the real estate sector in the Emirate of Abu Dhabi, experienced a revival in demand for new housing units in the nearby cities of Abu Dhabi Island as the preferred accommodation for newcomers to Abu Dhabi, according to Asteco Q1 2013 Property Report.

Abu Dhabi Tourism – hotel occupancy up 

According to data released by the Abu Dhabi Tourism and Culture Authority, the tourism sector experienced a revival at the beginning of 2013. The total number of guests in hotels during January 2013 was 203,925 increasing from 198,183 guests in January 2012, growing by 3 percent, due to the number activities held during the month, most importantly were the Liwa international Festival, the Abu Dhabi Sustainability Week 2013 and the Abu Dhabi HSBC Golf Championship 2013.

The total of number of hotel guest nights, increased by 19 percent in January 2013 compared to January to 2012. Hotels revenues increased by 4 percent to reach AED 427 million, while room proceeds and food and beverage proceeds went up by 6 percent and 3 percent respectively.

Hotels occupancy rate for the same period stood at 70 percent during the month of January 2013 rising 5 percent compared to January 2012. Length of stay during the month of January 2013 increased by 16 percent compared to the same month of 2012.

Abu Dhabi Stock Market – general index rise 15% in first quarter of 2013

As for capital market, ADX topped MENA stock markets in the first quarter of 2013 with the Abu Dhabi exchange’s general index increasing by 15 percent at the end of March 2013, to close at 3,025.33 points. March 2013 witnessed profit reaping for transactions of January and February 2013. This improvement came in the shadow of the most important merger between Al Dar and Sorouh real estate companies, which is the third largest real estate merger in the Middle East, with assets of more than AED47 billion.

The banking sector saw a strong recovery and activity in 2012 which reflected positively on the growth of banks profits, and contributed significantly to the rise of local stock markets during the first quarter of 2013. The banking sector is expected to see more revival during the coming period.

Industrial sector and Free Zones to spur economic and jobs growth

The government of UAE is committed to promoting trade and investment in the emirate by adopting business-friendly economic policies. It has allocated huge funds for investment in the country’s infrastructure so that industrial development may continue at a rapid pace. The development of multibillion-dollar Khalifa Industrial Zone (Kizad) in Taweelah and Specialized Economic Zones (ZonesCorp) are key to achieving this progress.

The year 2014 is expected to mark the setting of the first industrial project; in addition, the Government is working to build a specialized auto city close to Musafah.

According to the data issued by the Higher Corporation for Specialized Economic Zones (ZonesCorp), the volume of industrial investment in the Emirate of Abu Dhabi at the end of 2012 rose to more than AED22 billion. The industrial sector achieved a growth rates between (15-20%) during 2012 and this is expected to rise during the year 2013 under the industrial strategy announced by the Government of the Emirate of Abu Dhabi, which will attract more new foreign industrial investments.

In November 2012, ZonesCorp estimated that the construction of nearly 400 factories will begin in the coming period; and stated that corporation planned to create an industrial city for small and medium-sized industries in coordination with the Khalifa Fund for Enterprise Development.

Global business reports have also recognized the UAE government’s efforts to promote business activity in the region. In the Global Competitiveness Yearbook 2013, the UAE has been ranked among the top ten most competitive nations in the world. The improvement in rankings was a result of improved performance in government efficiency and economic performance. In 2011, the UAE was ranked 28th on the list, while it reached 16th position last year.

New Businesses on the rise in Abu Dhabi

Figures released by the Abu Dhabi Department for Economic Development reveal that a total of 1,947 licenses were issued to new businesses, including commercial and professional, in the first three months of 2013. Compared to the previous quarter when 1801 licenses were granted, this was an increase of 8 percent. However, this is much lower than the 2,161 new licenses that were issued in the first quarter of 2012.

According to the department, “the emirate experienced an increase in the number of new commercial licenses issued for business and professional activities and rising rates of employment compared to 2011”. Trade figures of the department also show that exports from the UAE also rose by about 4.4 percent.

The increase in number of licenses has been attributed to growth and diversification in other business sectors of the economy. In particular, the hospitality industry has continued to make impressive strides. Events like Abu Dhabi Sustainability Week have boosted the number of guests visiting the emirate and pushed occupancy rates as high as 70 percent.

Abu Dhabi Murban crude oil price

Regarding the Abu Dhabi Murban crude oil prices sub-indicator, Murban crude price increased during the months of January and February 2013, reaching USD 94.66/barrel and USD 115.40 /barrel respectively, which was higher than the registered December 2012 price.

However it dropped in March 2013 to about USD 109.95/barrel. Some projections indicated that the prices of Brent this year will range between ($95-$105) /barrel, due to increased production in North America; and the recovery, above expectation, of oil shale production in the United States, and the drop in expected demand for oil in Europe and America. Despite those prospects, some indications predict a slight increase in oil prices during the 2013, including rising in growth rates and high demand for oil in emerging countries, particularly China and India, in the light of reduced demand for Iranian crude oil and its low production.

Individuals Financial conditions improve amid optimism 

The financial conditions of individuals indicator, recorded an increase of 5 points in the first quarter of 2013 compared to the last quarter of the same year, bringing the value of the index on average to (112.5) points and (107.5) point respectively. The results reflected the optimism of individuals of different nationalities, on the current and future economic conditions in the Emirate of Abu Dhabi, in view of the provision of real jobs, salary increases and improved living conditions.

Respondents believed that the period (January-March 2013) was quite appropriate for purchasing long-term consumer goods, much better than (October-December 2012), where the index value for the purchase of long-term consumer goods registered (99.5) points and (98.9) points respectively. The results reflected the higher consumer confidence of decision-makers in the Emirate.

The sub-indicator of the current situation of economic enterprises, indicated high level of optimism in economic activities (services, industry, construction and trade) in general and the service activity in particular, showed high levels of optimism about the conditions of their enterprises and the economy at large, during the second quarter of 2013. This reflected the improved performance of the service sector during the first quarter of 2013, compared to other activities, especially trade and construction, which still need some time to resolve from the shocks of 2008.

Abu Dhabi Securities Exchange, experienced a note of revival and an improvement in market performance at the beginning of the year in view of profit taking by listed companies and banks in 2012, along with development and improved banking sector performance during the same period. All 63 listed local companies realized net profits of up to 18 percent at the end of 2012, compared to the same period in 2011.

The manufacturing sector alone accounted for an increase of 109 percent, followed by 76 percent for real estate. In this context, the Abu Dhabi Securities Exchange closed at the end of 31 December 2012 at (3025.33) points compared to (2652) points at the end of the at the rate of (14.99%).

Considering market performance during the first quarter of the year, it was noted that the market closed on 20/2/2013 at (3010.60) points breaking the barrier of 3,000 points for the first time since the session of 29/10/2009 which closed at (3023.10) points affected by the global financial crisis.

This confirmed the recovery of the Abu Dhabi Securities market and emphasised the start of real revitalization. It is quite natural that some stages of fluctuations permeate as an accepted result of profit taking.

Market recovery is expected to continue over the coming months as a result of the announcement of the distribution of cash dividend to shareholders, which will provide additional liquidity.

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